KANUBHAI RAMDAS PATEL(PROP. OF GUJARAT AGRO BASE COMPANY),MEHSANA V. THE ITO, WARD-5(2)(5), AHMEDABAD

ITA 1207/AHD/2024

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The case involves Kanubhai Ramdas Patel, the proprietor of Gujarat Agro Base Company, who appealed against the order of the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre, Delhi. The appeal contested the reopening of the assessment for the assessment year 2012-13 under section 147 of the Income Tax Act, 1961, and various additions made to the assessee's income. The primary contention was the procedural invalidity of the reopening and the substantive additions made, including the treatment of long-term capital gains (LTCG) as bogus and unexplained agricultural income. The Tribunal's decision focused on the improper procedural handling by the PCIT in approving the reopening of the assessment, leading to the allowance of the assessee's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 822473 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 07-06-2024
• Other Referred Cases: Rajesh Sharadbhai Patel vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURESH CHAND MEENA
• Assessee Lawyers: M. K. PATEL
• Keywords: Reopening of assessment; Accommodation entries; Earning of tax free income; Bogus
• Section: 147; 148; 143(3); 142(1); 132

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘SMC’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD ] ] BEFORE MS.SUCHITRA R. KAMBLE, JUDICIAL MEMBER ITA No.1207/Ahd/2024 Assessment Year : 2012-13 Kanubhai Ramdas Patel Prop: Gujarat Agro Base Company C-1/70, GIDC Phase-II, Dediyasan Mehsana 384 002. PAN: AGZPP 2264 N Vs The ITO, Ward- 5(2)(5), Vejalpur Ahmedabad. (Applicant) (Responent) Assessee by : Shri M.K. Patel, Advocate Revenue by : Shri Suresh Chand Meena, Sr.DR सुनवाई क तारीख/Date of Hearing : 01/12/2025 घोषणा क तारीख /Date of Pronouncement: 24 /12/2025 आदेश आदेश आदेश आदेश/O R D E R The above appeal has been preferred by the assessee against order passed by the Ld.Commissioner of Income-Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “ld.CIT(A)] dated 18.5.2024 under section 250 of the Income Tax Act, 1961 (\"the Act\" for short) for the assessment year 2012-13. 2. In this appeal, the assessee has raised the following grounds: (1) That on facts and in law the learned NFAC-CIT(A) has grievously erred in confirming The re-opening of assessment u/s 147 of the Act. (2) That on facts, and in law, it ought to have been held that entire re- opening u/s 147 of the Act is invalid and void ab initio as the reasons recorded and approval u/s 151 of the Act is given on erroneous and factually wrong facts. (3) The learned NFAC has grievously erred in not granting sufficient and reasonable opportunity, and in passing the order without waiting for the final outcome of RTI proceedings initiated by appellant. Printed from counselvise.com ITA No.1207/Ahd/2024 2 (4) That on facts and in law the learned NFAC-CIT(A) has grievously erred in confirming the addition of Rs.26,80,290/- made by treating the genuine LTCG as bogus. / (5) That on facts and in law the learned NFAC-CIT(A) has grievously erred in confirming the addition of Rs.53,605/- made towards estimated commission for alleged accommodation entry. (6) That on facts and in law the learned NFAC-CIT(A) has grievously erred in confirming the addition of Rs.3,66,900/- made by treating the agricultural income as unexplained. 3. Brief facts of the case are that the assessee is proprietor of M/s. Gujarat Agro Base Co., which is engaged in the business of trading in agricultural items, seeds and insect powder etc. The assessee filed return of income for A.Y. 2012–13 on 29.09.2012, declaring total taxable income at Rs.6,64,430/- and exempted income of Rs.4,12,031/-, being agricultural income. The assessee also claimed LTCG on sale of shares of Rs.26,16,889/- as exempt income u/s 10(38) of the Act. 4. A search u/s 132 of the Act was conducted in cases of Sanjay Shah & Jignesh Shah on 11.9.2018 and subsequent dates. Based on the information received and from the data disclosed in the return of income, the Assessing Officer found that the assessee is beneficiary of accommodation entry provided by Sanjay Shah & Jignesh Shah in the scrip of Dhwanil Chemicals Ltd. (also known as Shrey Chemicals Ltd. & Veronica Production Ltd.). Vide notice u/s 142(1) of the Act dated 25.06.2019, the assessee was called upon to furnish details regarding transactions in shares & securities including that of transactions on the scrip of Dhwanil Chemicals Ltd. (also known as Shrey Chemicals Ltd. & Veronica Production Ltd.). The assessee filed details and response vide submissions dated 09.08.2019. The Assessing Officer observed that the assessee claimed that assessee purchased 48,000 shares of M/s Dhwanil Chemicals Ltd. having face value of Rs.10/- in Printed from counselvise.com ITA No.1207/Ahd/2024 3 physical form on 9.4.2010 for a total consideration of Rs.48,000/- i.e. @ Re.1/- per share. Shares were purchased from one Akshay Narendra Madhani. The shares were credited to DEMAT account only on 21.6.2011. The notice u/s 142(1) was issued on 18.11.2019. In response to said notice, the assessee filed reply dated 20.11.2019 along with contract notes of shares, ledger account from Arihant Capital Markets Ltd., scrip-wise Demat ledger from Arihant Capital Markets Ltd., and bank account statement for the period. 4. The Assessing Officer observed that the original shareholder sold the shares at heavy discount of 90% of the face value and there was no explanation given by the assessee to such discount. The Assessing Officer further observed that the assessee could not produce evidence regarding purchase of shares on 9.4.2010, such as mode of purchase, cost details, details of payment, mode of payment, date of payment. In fact, the Assessing Officer also observed that the shares allegedly purchased on 9.4.2010 were not credited into DEMAT account of the assessee only on 21.6.2011, i.e. immediately before sale of shares. Thus, the Assessing Officer made addition of Rs.26,80,290/-, thereby disallowing claim of LTCG u/s 10(38) of the Act. The Assessing Officer further made addition of Rs.53,605/- as commission paid @ 2% for obtaining accommodation entries. 5. The Assessing Officer also made addition of Rs.3,66,900/- towards unexplained agricultural income, as the assessee did not furnish any details regarding expenses incurred on agriculture such as purchase bills for seeds, manure, fertilizers, etc. Further, the assessee owned small land holding of 0.58 hectare, and all other lands were owned by persons other than the assessee. The assessee did not Printed from counselvise.com ITA No.1207/Ahd/2024 4 provide evidence that agricultural activity was carried out by the assessee on the said lands. 6. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal. 7. The Ld. AR submitted that as regards Ground Nos. 1, 2 & 3, the entire reopening u/s 147 of the Act is invalid and void ab initio, as the reasons recorded and approval given were u/s 151 of the Act. The Ld. AR further submitted that the approval is on commodity trading transaction, whereas the addition was on LTCG u/s 10(38), disallowance on exempt agricultural income, and commission paid on accommodation entry. In fact, the approval u/s 147 dated 29.03.2019 gives the satisfaction on reasons recorded dated 28.03.2019, which categorically stated that the assessee has entered into commodity trading transaction. 8. As regards merits, the Ld. AR submitted that the said scrip was dealt with by the Tribunal in ITA No. 1517/Ahd/2024, order dated 29.07.2025, in the case of Rajesh Sharadbhai Patel vs. ITO. 9. The Ld. DR submitted that the letter dated 29.03.2019 and approval/satisfaction dated 28.03.2019 issued by the PCIT is only a formality/communication to the concerned Assessing Officer for issuing notice u/s 148 of the Act. The Assessing Officer recorded the reasons on 26.03.2019. The PCIT on 28.03.2019 had given his opinion by submitting separate annexure and signing the same. The Ld. DR submitted that the reasons recorded categorically mentioned the LTCG claimed by the assessee, that there was no scrutiny done in assessee’s case, and there is record of accommodation entries of LTCG against receipt of cash. The share transaction was not disclosed in the return of income. Thus, reasons recorded were proper and as per law. Printed from counselvise.com ITA No.1207/Ahd/2024 5 As regards addition, the same can be done while the assessment proceeding is going on u/s 147 r.w.s. 143(3) of the Act. The Ld. DR relied on the assessment order and order of the CIT(A). 10. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the reasons recorded dated 26.03.2019 for reopening u/s 147, annexed to the form for obtaining the approval of the PCIT, were signed by the Assessing Officer on 26.03.2019. In column No. 14, wherein the satisfaction of the PCIT on reasons recorded is required, though the same was shown as unsigned, the annexure to the letter dated 29.03.2019 (approval for action u/s 147 of the Act) was categorically signed on 28.03.2019, thereby mentioning commodity trading transaction. Whereas, the reasons for reopening were categorically mentioning about trading in scrip of Dhwanil Chemicals. Further, it is mentioned that no scrutiny assessment was done in the present assessee’s case. The discrepancy in the annexure dated 28.03.2019 signed by the PCIT and the unsigned form on part of the PCIT to the reasons recorded u/s 147 of the Act totally overlooks the procedure which has to be followed by the PCIT while granting approval. Printed from counselvise.com ITA No.1207/Ahd/2024 6 Printed from counselvise.com ITA No.1207/Ahd/2024 7 Printed from counselvise.com ITA No.1207/Ahd/2024 8 Printed from counselvise.com ITA No.1207/Ahd/2024 9 Printed from counselvise.com ITA No.1207/Ahd/2024 10 Printed from counselvise.com ITA No.1207/Ahd/2024 11 11. Thus, on this account, the initiation of assessment becomes void ab initio and bad in law. In fact, the Assessing Officer in the assessment order has categorically mentioned about the non- genuineness of the purchase of the scrip, but since the reasons recorded were not signed and properly approved by the PCIT, it fails the threshold envisaged under the Income-tax Act being the justifiable assessment. Thus, the assessment order does not sustain and is bad in law. 12. In the result, the appeal of the assessee is allowed. Order pronounced on 24th December, 2025. Sd/- (Suchitra Kamble) Judicial Member Ahmedabad,dated 24/12/2025 vk* Printed from counselvise.com "